Wholesale Broker

Wholesale Broker

Definition

A type of insurance broker who acts as an intermediary between a retail broker
and an insurer, while having no contact with the insured. Wholesale agents
place business brought to them by retail agents. Unlike a retail broker,
wholesale brokers have direct contact with the insurer, whereas the retail
agent who produced the business does not. The same broker can function as a
retailer or wholesaler, depending on the specific situation.

Wholesale brokers often possess specialized expertise in a particular line of
coverage or in a line of coverage that is unusual and/or have greater access to
or influence with certain insurance markets, which is especially valuable when
dealing with a difficult-to-place risk.

There are two types of wholesale brokers: managing general agents and surplus
lines brokers. The latter work with the retail agent and the insurer to obtain
coverage for the insured; but unlike a managing general agent, a surplus lines
broker does not have binding authority from the insurer.

Related Terms

A specialized type of insurance agent/broker that, unlike traditional
agents/brokers, is vested with underwriting authority from an insurer.
Accordingly, MGAs perform certain functions ordinarily handled only by
insurers, such as binding coverage, underwriting and pricing, appointing retail
agents within a particular area, and settling claims.

Typically, MGAs are involved with unusual lines of coverage, such as
professional liability and surplus lines of insurance, in which specialized
expertise is required to underwrite the policies. However, MGAs also write some
personal lines business, especially in geographically isolated areas (e.g.,
western Oklahoma, North Dakota) where insurers do not want to set up a branch
office.

MGAs benefit insurers because the expertise they possess is not always
available within the insurer's home or regional offices and would be more
expensive to develop on an in-house basis.

An insurance agent who acts as an intermediary between an insured and the
marketplace. In some instances, retail agents deal directly with an insurer in
arranging coverage, while in others, retail agents work with managing general
agents or wholesale brokers to secure coverage for their client-insured.

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